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MOSL: Morning India (26/March/19): 1. GST (The 20 months of the GST regime); 2. Annual India Ideation Conference 2019 (‘Management Says’); 3. Capex Tracker (FY18 private sector capex declines for seventh year i

MOrning India (26/March/19): 1. GST (The 20 months of the GST regime); 2. Annual India Ideation Conference 2019 (‘Management Says’); 3. Capex Tracker (FY18 private sector capex declines for seventh year in a row)

 

Today’s top research theme

GST: The 20 months of the GST regime

Key trends in the new era

Around 20 months ago, India ushered in the Goods & Services Tax (GST), which is billed as one of the biggest indirect tax reforms in the country’s history. This was a major step toward simplifying taxation and facilitating ease of doing business by rationalizing tax rates, improving efficiency in the system and shifting trade in favor of the organized segment. Although it is still early to evaluate whether the GST is really a ‘good and simple tax’ – as reforms are said to be slow boring of hard boards – we, in this note, have highlighted some of the key trends of this new tax era.

• The Indian government over the past two years has taken many proactive steps to streamline the GST by providing procedural relaxations and clarifications. However, this has led to a deferment in the implementation of a few important anti-evasive measures, and thus, the shift in trade toward the formal economy has been slower than anticipated.
• GST collections have increased YoY in FY19 (until February), but the monthly average collection is lower than the target, slimming the prospects of achievement of the full-year target. However, in our view, collections should improve once the anti-evasive measures are put in place.
• In the new tax regime, the manufacturing sector has witnessed an increase in working capital requirements, while the services sector has had to comply with increased state-level compliances and seen higher tax rates.
• Clarity on including petroleum products and gas under the ambit of GST and anti-profiteering norms is still awaited. 

Piping hot news

Telecom revenue slips for 3rd straight year in FY19

• The telecom sector will witness the third consecutive year of revenue decline despite consolidation in the industry. This is because operators continue to face intense pricing pressure. The industry as a whole has not managed to raise average revenue per user (ARPU) to sustainable levels and the capex and debt burden of operators have spiraled out of control, said analysts. Analysts expect the sector’s revenue to dip by 7 per cent in FY19 over the previous year, while earnings before interest, depreciation, tax and amortization or EBITDA would decline by around 18 per cent. This, however, is better than FY18 when the sector had witnessed a 11 per cent revenue dip to Rs 2.1 trillion and an 18 per cent dip in EBITDA. FY17, too, had seen 11 per cent drop in revenue, while the EBITDA decline was around 7 per cent